Alex Says That $400 Saved for One Year at 4

question 91

Multiple Choice

Alex says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest.Brian says that the present value of $400 one year from today if the interest rate is 4 percent is more than the present value of $400 two years from today if the interest rate is 2 percent.

• A)Alex and Brian are both correct.
• B)Alex and Brian are both incorrect.
• C)Only Alex is correct.
• D)Only Brian is correct.

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Definitions:

Flexible Interest Rates

Interest rates that can change over the duration of a loan or savings account, responding to market conditions.

Aggregate Saving

The total amount of saving in the economy, consisting of both private savings by individuals and public savings by the government.

Keynesian Macroeconomic Theory

An economic theory stating that government intervention through fiscal and monetary policy can manage economic fluctuations.

Long-Run Equilibrium

A state in which all factors of production and market forces are fully adjusted, leading to a consistent and stable economic situation.